Should Tax Defaulters be Named and Shamed?

In a unique decision which balances the public interest in naming and shaming tax defaulters against the privacy and reputational rights of the individual, a solicitor accused of under-declaring his liability to pay Stamp Duty on a property purchase has been granted at least temporary anonymity by a tax tribunal.

The solicitor and his wife had jointly bought a property for more than £760,000 but had declared the purchase price to HMRC as £100,000. Although more than £30,000 in Stamp Duty was due on the transaction, none was paid until HMRC launched an inquiry.

Upon discovery of the default, the couple signed a settlement agreement with HMRC by which they paid the sum due, plus a penalty of more than £16,000. However, when the couple learnt that their names would appear on a list of deliberate defaulters, they appealed to the First-tier Tribunal (FTT) against the penalty.

The couple insisted that their under-declaration was inadvertent. They argued that the publication of their names on the list would be ‘akin to libel’ and was likely to have serious professional consequences for the solicitor. However, HMRC argued that the couple had been ‘prepared to admit to tax evasion as long as no one found out about it’ and that the public interest demanded full public disclosure.

In refusing permission to appeal, the FTT found that the settlement had not been conditional on the couple’s names being kept out of the public domain. The full and final agreement reached had the force of contract and the FTT therefore had no jurisdiction to consider the matter.

Turning to the privacy issues raised, the FTT found that it would be ‘inimical to justice’ to assist the solicitor in hiding his alleged misdemeanours from the Solicitors Regulation Authority (SRA), his clients and potential clients. His professional status, far from justifying anonymity, positively favoured full publication.

However, in granting the couple anonymity until the end of the appellate process, the FTT noted that HMRC’s accusation of dishonesty had yet to be subjected to proof and that the couple had an arguable case that they had made an honest mistake. The decision meant that the couple would not be publicly named until all possible avenues of appeal against the penalty had been exhausted.

Dementia Sufferer Capable of Executing £2 Million Will

A businessman engaged in a marathon dispute with his siblings over their £2 million inheritance has failed to convince the Court of Appeal that his mother was so badly affected by dementia that she lacked the mental capacity to execute a valid will.

Under an earlier will, the businessman had been left a residential property and 16 crucial shares in a family company, which would have given him a controlling interest in the business. But his mother, who died aged 91, made a new will on her 88th birthday, leaving all but £20,000 of her estate equally between her three surviving children and the family of a fourth child who pre-deceased her.

'If there is one apple, it ought to be divided into four', was one of the mother’s favourite sayings; however, the businessman nevertheless argued that she lacked testamentary capacity when she signed the will and did not have the required knowledge and approval of its contents.

His legal team pointed out that his mother had written about the great help he had given the rest of the family since the death of his father and that it had been he who had taken over and grown the family company. The equal division of the 16 shares would also leave the business in deadlock.

His arguments failed before the High Court and, in dismissing his appeal, the Court of Appeal found that, although she had suffered from dementia for several years and was not as mentally sharp as she once had been, the mother knew what she was doing when she appended her signature to the will.

The businessman’s lawyers argued that, by the time the will was executed, his mother could not remember exactly what assets she owned or why she had favoured him in her previous will. She was also said to have sometimes forgotten that her oldest son had died the year before.

However, the Court noted evidence that she had not wanted to benefit any one of her children more than the others and that she was well aware that her departure from her previous will would be to the businessman’s detriment. The conclusion that she had made a conscious decision was fully supported by the evidence.

The draft will, which was in relatively simple terms, had been read twice to her before she signed it and she had appeared to understand it after reading it again to herself. The conclusion that she had full knowledge of its contents, and approved them, was in the circumstances 'unassailable'.

Judge Urges ‘Bleak House’ Family to Compromise

In a plot reminiscent of Charles Dickens' 'Bleak House', a judge has warned that a costly family dispute over the will of a successful property entrepreneur could see every penny of his fortune being eaten up by legal costs.

During his working life, the businessman had built up a valuable real estate portfolio. However, his death, aged 76, in September 2007 was the curtain raiser for years of bitter legal strife between his three grown up sons and his second wife – their stepmother – over the terms of his will and the destination of various assets.

The High Court noted that 'upwards of £200,000' in legal costs had been racked up during the businessman’s 'long and acrimonious' divorce from his first wife and the mother of his sons during the 1990s. He had been described as 'devious, wily and cynical' by a divorce judge who had 'urged the parties to find some form of compromise and reminded them of what happened in Bleak House'.

But those words had not discouraged a renewed outbreak of legal warfare within the family after the businessman’s death, in respect of property assets that were held in a complex corporate structure. The Court made a number of rulings relating to the interpretation of the will and other matters but acknowledged that its decision had left unresolved a number of important issues in the case.

In a stern warning to the family, the Court observed, "In 1998, when the divorce proceedings were before a district judge, he urged the parties to compromise and commented on the vast amount of costs that had been spent. The costs involved in this litigation must also be vast.

“Substantial more costs will have to be spent to determine the outstanding issues. I can only repeat the judge's plea that the parties should now attempt to put their heads together and reach some sensible solution. Otherwise, the whole estate will vanish in costs."

Beneficiaries of Jimmy Savile’s £3.3 Million Will May Receive Nothing

In giving directions for the administration of the estate of the late entertainer Jimmy Savile, the High Court has acknowledged that the entirety of his £3.3 million fortune may well be exhausted by a large number of personal injury claims being pursued by those who claim to have suffered sexual abuse at his hands.

When Mr Savile died in October 2011, he left a will bequeathing his assets to various beneficiaries, including his niece and next-of-kin, Amanda McKenna. The residue of his estate was to pass to the Jimmy Savile Charitable Trust. However, highly publicised allegations of child abuse against the star had resulted in an avalanche of personal injury claims being issued against his estate.

Almost 140 such claims had already been launched and, although the allegations against Mr Savile had yet to be tested before a judge, the Court noted, “There is no serious dispute that some, perhaps many, of the claims may be well-founded and meritorious. If such claims are substantiated, there is a serious possibility, to put it no higher, that they would exhaust the money remaining in the estate, leaving the individual beneficiaries and the Trust with nothing.”

However, it could not be assumed that that outcome would arise, and the Trust and beneficiaries had a legitimate interest in ensuring that the claims were properly scrutinised. They continued to maintain that a substantial portion of the estate may remain available for distribution to them under the will.

National Westminster Bank plc had been appointed by the will as executor of the estate and Mr Savile’s personal representative. However, the trustees of the Trust had applied under Section 50 of the Administration of Justice Act 1985 for the bank’s replacement in those roles on grounds that it had failed to act in the interests or for the benefit of the Trust and the other beneficiaries.

In dismissing that application, the Court rejected a number of criticisms of the bank’s conduct and found that it had performed its duties appropriately. The Court also approved the bank’s scheme for administration of the estate, which was designed to achieve speedy and inexpensive resolution of existing and future personal injury claims against the estate.

Under Section 284(1) of the Insolvency Act 1986, the Court also ratified various expenses incurred by the bank in executing the will and administering the estate, including the substantial legal costs that had been incurred in relation to the personal injury claims.

Elderly Director’s Failing Memory Excused Late VAT Payment

Even tax deadlines, it seems, can occasionally be tinged with mercy. The First-tier Tribunal (FTT) has upheld a company’s appeal against a penalty for late payment of VAT on the basis that its principal director – an elderly man who was prone to forgetfulness – got his dates confused.

The 77-year-old director of an award framing business had believed that the relevant quarter day fell at the end of September 2013 and that the VAT was therefore due on October 10. The due date was in fact September 10. He had arranged immediate electronic payment on realising his mistake, but the company was nevertheless hit with a £1,127 penalty by HM Revenue and Customs (HMRC).

In allowing the company’s appeal, the FTT accepted that the director had made a genuine mistake and that his age and declining memory constituted a ‘reasonable excuse’ for the delayed payment. In assessing whether he had acted reasonably, the FTT noted that his age and state of health were relevant. He had since altered his payment systems to ensure that that the same would not happen again.

Court Pleads for Peace in Bowling Green Row

In an extreme example of a friendly society whose members ended up on anything but friendly terms, three of the country’s most senior judges have pleaded for an end to five years of bitter recrimination that drove a working men’s club to the brink of managerial paralysis.

The financially troubled Blakeborough Social & Sports Club, established under the Friendly Societies Act 1974 and based in West Yorkshire, had been riven by warring factions within its 600-strong membership ever since plans to sell its bowling green were first floated in 2008.

A group of bowling members bitterly opposed the move and the flow of accusations and counter-accusations at one point became so fierce that police became involved. Two court hearings failed to achieve a resolution that suited all sides and the dispute ultimately made its way to the Court of Appeal.

In allowing an appeal by the bowling members, the Court found that the club's President, Treasurer and Committee had not been validly elected at an annual general meeting (AGM) in July 2011. Procedures followed during the meeting had been seriously flawed, not least because the club’s officers had purportedly been elected by a show of hands, rather than by a secret ballot as its rules required.

However, the Court described its ruling on that issue as 'of academic interest only' in that a fresh AGM had been held in March 2013 and there had been no challenge to its resolutions. Although the bowling members had established that their expulsion from the club had been unlawful, they were nevertheless ordered to pay the lion’s share of the action’s heavy legal costs.

A fresh AGM was due to be held shortly and Lord Justice Lewison noted, "I should stress that it will be of the utmost importance that the forthcoming AGM is conducted strictly in accordance with the rules and that the paper trail is scrupulously kept, otherwise this unhappy saga will have no end."

The judge said that a November 2009 meeting at the club had become so ‘rowdy’ that it had to be abandoned. Bowling members had later ‘attempted what was, in effect, a palace revolution’ by purporting to convene a special general meeting in a bid to oust the club's officials.

They had 'also called in the police to investigate allegations of financial irregularities in the management of the club'. Those claims were investigated at length by the police but did not result in any prosecutions. Prompted by a judge, the club had held the July 2011 AGM, but Lord Justice Lewison observed, "One might have thought that, in this febrile would be taken to ensure that the rules of the club were scrupulously complied with. Unfortunately, that did not happen."

£489,000 Bequest to Charities Sparked Legal Marathon

A woman whose mother left her entire £489,000 estate to animal charities will have to be satisfied with ‘reasonable provision’ of £50,000 from the estate after the High Court rejected her plea that she should be granted half.

The mother of five children, aged in her 50s, fell out with her mother after eloping from the family home with her boyfriend when she was 17.  Her mother never forgave her and, when she died aged 70, did not leave her a penny in her will.  Her daughter and grandchildren were left to exist largely on state benefits.

After a lengthy legal struggle, which encompassed four court hearings, including one before the Court of Appeal, the daughter’s straitened circumstances persuaded a judge that she was entitled to reasonable provision of £50,000 from her mother’s estate under the terms of the Inheritance (Provision for Family and Dependants) Act 1975.

Appealing for a more substantial share, her lawyers pointed out that the terms of her mother’s will were unreasonable and argued that she should be awarded about half of the estate to meet basic needs, particularly for rehousing.  Her application was resisted by the charities which benefited under the will.

The Court acknowledged that the charities had ‘no claim, moral or otherwise’ on the mother’s bounty.  However, in dismissing the daughter’s appeal, the Court noted that the £50,000 was ‘a windfall’ for her to spend on improving her circumstances as she wished. Whilst recognising the daughter’s difficult financial position, the Court found that it was not ‘manifestly wrong’ to refuse her a sufficient lump sum to rehouse herself, her husband and the one child who remained at home.